The Poverty of Policy on Poverty

Earlier this month, those who govern us – and those who would govern us – each laid out their vision of how to alleviate poverty in the United States. Since there is currently a rather large amount of poverty around that ideally would be rapidly alleviated,[1] you could legitimately expect that the proposals that each brought to the table might significantly erode the poverty under review. Sadly, however, neither set of proposals do.

THE RYAN REPORT

The first were those contained in the House Budget Committee Report, The War on Poverty: 50 Years Later, released by the Committee’s chairman, Paul Ryan, on March 3rd. The Report presents itself as a calm stocktaking of the effectiveness of particular federal welfare programs based on the latest official data and academic research. It purports to be even-handed – not partisan – both in its understanding of poverty and in its evaluation of individual programs. It recognizes that “there are many reasons why poverty persists to such a wide extent today” and that “not every program is counterproductive or unnecessary; indeed some are very important.” But the overall message of the report is still exactly what you would expect from a House Committee dominated by Republicans: that “federal programs are not only failing to address the problem. They are also in some significant respects making it worse.” According to the Report, federal programs make poverty worse primarily by acting as a disincentive to labor-market entry, trapping people behind effective tax rates that can reach nearly 100% as people replace welfare benefits with low-paid earned income. As the text puts it, “there are so many anti-poverty programs – and there is so little co-ordination between them – that they often work at cross purposes and penalize families for getting ahead.”[2]

However the Report is not quite as serious or scholarly as Paul Ryan would like us to believe. Much of it looks like simple cover for any future House budget prioritizing – as earlier budgets have done – substantial cuts to federal programs behind the softening rhetoric of “welfare reform.”[3] It is true that the report concedes the effectiveness of some programs – Earned Income Tax Credits being the most significant, among at least 16 programs in total[4] – but it still directs its particular ire at two (Food Stamps and Medicaid) that were heavily targeted in previous Republican-designed budgets and will no doubt be similarly targeted in Republican budgets to come. The problem with the report in general is that its claim for serious scholarship was rapidly challenged by some of the experts cited, unhappy at the interpretation placed there on their work.[5] And the problem with that particular targeting of SNAP and Medicaid is that those two have been among the most effective of welfare programs to date – food stamps alone reducing the poverty rate by nearly 8% in 2009 according to figures recently released by the Department of Agriculture,[6] and Medicaid providing access to basic healthcare for millions of poor Americans otherwise unable to afford it.[7] Contrary to the thrust of the Ryan Report, “without government programs such as food stamps and unemployment benefits, the poverty rate would grow from 16% to 28.7%, causing the ranks of the poor to swell from 50 million to 90 million people.”[8] How could it be otherwise when the incomes of one American in three fell below the poverty level for their size of family forat least two months between 2009 and 2011,[9] and when programs like SNAP currently reach 47 million Americans, 91% of whom are on incomes below the poverty line. Decrying the importance of such federal aid takes some doing when half of all American children receive food stamps at some point in their lives.[10] Sadly, the main ideas canvassed in Paul Ryan’s War on Poverty are, as The New York Times rightly put it, both “small and tired,”[11] foreshadowing not an end to poverty but rather yet another period of public parsimony to those most in need of support. And if you doubt that, just remember what Paul Ryan subsequently told CEPAC – criticizing federally-funded school lunch programs for offering children “a full belly and an empty soul.”[12]

Even the claims about poverty traps in the House Budget Committee Report are heavily overdrawn. All welfare systems contain poverty traps. That is widely known: but welfare provision in the United States is so modest – you try living on $133 a month (the average figure for food stamp payouts nation-wide[13]) – that the notion that such generosity prevents most welfare recipients from actively seeking work is clearly nonsense. So too is the underlying implication that a significant number of those trapped in poverty in the contemporary United States are trapped there voluntarily – poor pure and simply because they are not actively seeking work.But with nearly three unemployed Americans for every job now available, voluntary unemployment is not our major poverty problem right now. Our major problem is the large number of Americans trapped in or on the edge of poverty because of their inability to find work, or to find work that pays enough to lift them and their families into affluence: which is why the House Budget Committee would do better to redirect energies towards the evaluation of policies that reduce involuntary unemployment. Unfortunately doing that would, of course, commit House Republicans to a serious engagement with federal programs designed to stimulate the economy – programs to which they are opposed in principle and against which the Tea Party wing of the Republican Party has entirely set its face.

THE PRESIDENT’S BUDGET

The President’s budget, released on March 4, is significantly better in these regards, in that it proposes raising the minimum wage to $10.10 an hour, extending access to Earned Income Tax Credits for 13.5 million low-income childless workers and young workers,[14] and making long-term unemployment insurance immediately available to the 1.7 million Americans now in need of it. If ever implemented, this particular iteration of an Obama budget will increase federal funding to states and localities that provide training and employment services, and direct extra funding to Community Colleges that partner with local employers to create new training programs and apprenticeships. These moves are advocated this time – they have been advocated many times before – as part of what this budget calls an “Opportunity, Growth and Security Initiative” which, on the non-defense side, proposes investments in six areas: education, research & innovation, infrastructure & jobs, labor market support, public health & safety, and efficient government. The money involved in each area is modest, but the package as a whole, some $56 billion – split evenly between defense and non-defense spending – is offered by the Administration as a serious spur to both immediate economic recovery and long-term economic growth. And as a budget, it comes at the end of a series of Presidential calls for action – calls made in both the last State of the Union Address[15]and in an important policy speech in Washington in December[16] – urging policy-makers to address and reduce levels of income and wealth inequality in the United States that, in the President’s view at least, now threaten America’s social fabric.[17]

Unlike the Ryan proposals, these are at least moves in the right direction. But they remain flawed in at least three fundamental respects. One is the sheer modesty of the policy aspirations, when set against the scale of the poverty problem. A second is their co-existence with other policies – not least the Administration’s active pursuit of free trade deals in a Trans-Pacific Partnership – that are likely to further speed the outsourcing of well-paid American jobs;[18] and the third is simply the sheer political inability of even a well-intentioned Administration to squeeze any of its key proposals through a House of Representatives whose majority is determined that no Obama-designed proposals will pass. This latter weakness is hardly of the Administration’s direct making, but the other two definitely are. A minimum wage of $10.10 an hour will still leave trapped in poverty a family of four dependent on that income alone – this in a country in which since 1979, as the President himself said, “our economy has more than doubled in size, but most of that growth has flowed to a fortunate few.”[19] A $56 billion stimulus package will still leave millions unemployed throughout the remaining Obama term in office; and proposals as modest as these fall way short of those advocated by more serious voices on the Democratic Left – just canvass any/all of the policy packages currently available from the Center for American Progress, the Center for Economic & Policy Research, or the Economic Policy Institute.

For as those think-tanks realize, it just isn’t enough to offer small-scale industrial policy changes when the scale of long-term unemployment remains as high, and indeed as entrenched, as it now is. The job numbers in the United States are currently terrible. As this is drafted, “more than one in six men between 25 and 54 is without a job;”[20] 70% of those who had entirely dropped out of the labor market are under 55;[21] and “four and a half years since recovery began,” there are “still no jobs for more than 60% of job seekers.”[22] Indeed, one unemployed worker in every three has currently been unemployed for more than 27 weeks;[23] and those unemployed workers – nearly 40% of the total unemployed – are currently living without wages in households that also contain 2.3 million children.[24]Nor is policy-moderation appropriate on either the minimum wage or the taxation of high earners when we stand, as we now do, at the end of a decade in which wages have stagnated,[25] the real value of the minimum wage has eroded,[26] and the degree of income and wealth inequality has returned to 1920s levels.[27]“Currently, half of American employees earn less than $26,000 annually;”[28]and because they do, poverty in the United States is no longer a monopoly of those dependent on inadequate welfare payments or a limited state pension. One-third of those now officially poor in the United States are poor even though they work full-time; and they are joined in their poverty by the nearly two million adult workers who were employed but are now the victims of long-term entrenched unemployment. Well might Robert Kuttner criticize those who labeled the 2014 budget proposals as populist and radical. They were neither: indeed as recently as “a decade ago, [they] would have been regarded as center-right.”[29] Food-stamp protection, a modest stimulus program, and a push for a $10.10 minimum wage can only scratch the surface. If we want truly to eradicate poverty, we have to do so much more.

FUNDAMENTAL DESIGNS FLAW IN EACH SET OF PROPOSALS

The short-fall in policy proposals is not accidental. It is the product of deep flaws in policy design, themselves reflective of serious misunderstandings about (or misspecifications of) the causes of poverty and its cures.

Those design flaws and misunderstandings are at their greatest on the Republican side. To a significant degree, many Republican lawmakers seem entirely indifferent to the plight of the American poor.[30] Nicholas Kristof has recently written of a serious compassion gap in contemporary America – a gap touching both left and right, and holding majority sway among Republicans.[31] He is right: and when Republicans in particular do address the plight of the poor, far too often they are content to place the blame for poverty on those actually trapped inside it. Regardless of the regularity with which they are repeated, many of the stereotypes common in Republican poverty-discourse are quite simply false.[32] The scale of welfare fraud is over-stated: no one is living the life of Riley on welfare handouts alone. Drug use among welfare recipients is only marginally higher than in the population as a whole. Long-term unemployment insurance does not stop people looking for work. The vast majority of the American poor are not shiftless and idle: they are either involuntarily unemployed or hardworking but underpaid. Low-wage workers are not less educated than in the past. They are more educated.[33]And it simply is not the case that you exhaust the causes of poverty by pointing to family breakdown, the incidence of under-aged pregnancy, and the lack of high-school diplomas by members of the American poor.[34] Factors like that help to explain who is poor, but they do not explain why the poverty-slots exist into which those people then fall. For low wages to cause anyone to be poor, there have to be low wages. For single-parents to fall out of the labor market because of the impossibility of combining the role of worker with that of parent, there has to be a shortage of affordable childcare.[35] For unemployment to rob people of the ability to survive without public assistance, there has to be an economy running at less than full employment; and for welfare payments to keep people poor, those welfare payments have to be disproportionately low. People make their own history, but they do not do so in conditions of their own choosing.

Republican anti-poverty policy places great weight on personal responsibility. It is the job of the American poor, so we and they are regularly told, to get themselves out of poverty. Now personal responsibility is the necessary last moment. We can all agree on that. But if the Republican audience genuinely wants the American social play to have the happy ending they desire, they will have to do something too about the inequalities and inadequacies that currently characterize the stage-set on which it is being performed. If they do not work on the positions that create poverty, and focus instead only on the individuals currently occupying them, all that can happen is that some of those individuals will escape to affluence, but the positions of the poor will still be there, to be filled by the next generation of the under-resourced. “People will rotate in and out of poverty, but poverty itself will remain.”[36] Republican anti-poverty policy, that is, focuses exclusively on agents rather than on structures. A full anti-poverty policy has to focus on both. And an anti-poverty policy that focuses on agents while reinforcing the structures creating poverty is to be doubly damned: and how else are we to judge Republican enthusiasm for cutting welfare while simultaneously defending corporate welfare and the light taxation of the rich.

Even the Democrats fall short of an adequate anti-poverty policy when they treat poverty as just another policy area to be tackled alongside the rest, and when they too focus on helping people to escape from poverty while leaving structures of wealth and income inequality intact. Helping people get up the income ladder is better than telling them, Republican-style, to simply climb harder on their own; but such help is not enough ifthe rest of the policy agenda fails to raise the whole ladder, or even elongates its lower rungs by trade policies that export good jobs abroad. Poverty of the scale we have now is neither accidental nor superficial. Poverty on the scale we have now is a core consequence of the economic growth strategy first put in place during the Reagan Administration and subsequently sustained by both Clinton and Bush II: a strategy based on the deregulation of business and finance, the celebration of trickle-down economics, the tax-supported outsourcing of well-paid manufacturing jobs, and the tolerance of 1920s-scale inequalities in income and wealth inequality. An effective attack on existing levels of poverty has therefore to do so much more than merely raise the minimum wage, protect food stamp provision, increase earned income tax credits and give federal support to low-paid workers seeking healthcare coverage – though it obviously has to do all those things in very short order. It has also to entirely reset US industrial and trade policy over the longer-term, the better to reconstitute a strong US-based manufacturing sector, to replace a wage race to the bottom with one to the top, and to make full-employment the central goal of fiscal and monetary policy at both the federal and state level.

The poor don’t always have to be with us. They are with us only because of choices – not choices made by them, but choices made by the rest of us. It is time to change the choices.